Groups petition Congress for stand-alone energy storage tax credits

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Dive Brief:

The Energy Storage Association and 36 other companies and associations on Friday sent a letter urging congressional leadership to provide clarity on the eligibility of energy storage for the Investment Tax Credit (ITC).

The signatories, which include AES Energy Storage, E.On North America, Invenergy, LG Chem and Stem, say developers of energy storage projects face uncertainty because the rules governing the ITC for energy storage are often decided on a case by case basis.

The signatories argue that energy storage projects could grow more quickly if energy storage were granted eligibility for the ITC on a stand-alone basis.

Dive Insight:

Developers of energy storage projects have complained in the past that existing regulations regarding tax credits for energy storage force projects to operate in ways that do not necessarily make the best use of storage assets.

An energy storage project can make use of the ITC only if it is part of a solar power installation and meets specific criteria.

The energy storage device must be charged by the renewable resource 75% of the time, and falling under 100% renewable charging docks the tax credit by a commensurate amount. The rule also looks backward for the first several years of a project and so could threaten the tax credit at any point during that period.

Energy storage interests are now seeking to remedy that situation. They see an opening for energy storage in a potential tax extenders bill that has been talked about recently in the context of the pending tax cut legislation that Congress is expected to vote on soon.

In one view, the tax extenders bill would provide extensions for technologies that were left out, or orphaned in Beltway lingo, when the ITC and the production tax credit (PTC) were extended in a 2015 bill.

The letter by the ESA and other storage interests is a “direct response to public discussions of an energy tax extenders bill,” Jason Burwen told Utility Dive via email. The tax extender provisions could be part of a continuing resolution that Congress must pass by Dec. 22 in order to continue funding the government. The more likely vehicle, however, would be as part of a January omnibus bill.

There also was a bill introduced in the fall that directly addresses energy storage incentives, the Energy Storage Tax Incentive and Deployment Act (S. 1868 and H.R. 4649).

No matter the vehicle, the signatories want to see an ITC for stand-alone storage. In the letter, they argue that storage performs the same functions for the grid whether or not it is co-located with a specific generator.

“We’d prefer not to constrain the development pathways to allow storage to deploy as a standalone asset, or for that matter to pair with whatever generator it wishes, gas, wind, solar, nuclear, what have you,” Burwen said.